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Apple suppliers fear COVID surge over Chinese New Year

Workers offered incentives not to go home as regional cases rise

TAIPEI -- A string of Apple's most important suppliers in China are trying to quash fears of renewed coronavirus outbreaks by offering extra handouts to workers if they do not travel home for the upcoming Lunar New Year festivities.

The companies want workers to stay put and not risk exposing themselves to infections, showing how worries over COVID-19 and labor shortages are plaguing a vital part of the tech supply chain.

Pegatron, a major iPhone supplier, is offering production line workers a 4,000 yuan ($617) bonus if they stay at its factories across China for the Lunar New Year holiday, also known as the Spring Festival. The company will also waive dormitory fees between January and March.

Luxshare Precision Industry, which builds AirPods earphones and the Apple Watch, posted an open letter urging employees to spend the holiday at its factories and promising rewards and entertainment for those who stay.

"For the 2021 Spring Festival, we call on employees to spend the holidays where you are, and to spend the time with your colleagues at the company where it is safe. A different family, the same reunion," Luxshare said in its official WeChat channel. "You will make yourself, family, friends, colleagues, the company and the country safe!"

Major Apple supplier Foxconn has posted a recruitment advertisement for its Longhua campus in Shenzhen, which supplies not only Apple but also Google and Amazon, urging potential workers to "stay locally for the Chinese New Year."

"We will still be very busy during the Spring Festival and we are recruiting more workers and offering good compensation," the posting read. "Staying on-site amid the pandemic is making the biggest contribution to yourself, others, and your country."

The Spring Festival is the most important holiday of the year in China, a time when people across the country -- and even those living overseas -- return to their hometowns to spend time with their families. But the number of coronavirus cases has been rising, especially around Shijiazhuang, the capital of Hebei province, as well as the northeastern provinces of Heilongjiang and Jilin.

Tech suppliers are desperate to avoid a repeat of last year, when they struggled to keep manufacturing sites housing tens of thousands of workers virus-free while dealing with labor shortages brought on by strict quarantine measures and traffic restrictions during the first phase of the pandemic.

The disruption significantly impacted the release schedules of several products, including the iPhone 12 range.

Tech suppliers' main aim is to lower the risk of a superspreader event during the mass travel period -- known as Chunyun -- surrounding the Spring Festival. China's Ministry of Transport has estimated that around 1.7 billion trips will be made between Jan. 28 and March 8.

But companies are also worried about labor shortages because workers who do go home face a number of hurdles before returning to work.

In addition to testing negative for coronavirus, workers will have to quarantine for up to 14 days, followed by a seven-day self-monitoring program, depending on local government regulations.

This could make it difficult for tech suppliers to quickly resume production, even as demand for smartphones, notebooks, tablets, servers and auto parts remains strong and shortages of chips and components reverberate through the industry.

Companies and governments alike are trying to reduce the risk of further infections.

Zhengzhou, where Foxconn operates the world's largest iPhone assembly complex, has offered free polymerase chain reaction (PCR) testing for everyone working and living in the Zhengzhou Airport Economic Zone -- the hub specifically for iPhone manufacturing -- between Jan. 24 and Jan. 25 as a test run for more widespread testing.

The local government set up more than 280 temporary sites to conduct PCR tests, and only vehicles with special permits were allowed to travel during the drill, according to Foxconn's Zhengzhou site WeChat channel.

"We are prepared to keep as many workers as possible during the Spring Festival to ensure our production won't be affected by the upcoming holidays in China," a source in Foxconn told Nikkei Asia.

Last year Foxconn was even told by the local government to briefly halt its planned production restart in Shenzhen in early February as officials worried the company was not ready to reopen the factory. It was not until around the end of March last year that the iPhone assembler secured enough workers to meet seasonal demand for production.

China's State Council on Monday released a notice to all local governments that residents in high-risk regions should stay locally for the Lunar New Year, while people in medium-risk areas will need approval from epidemic prevention authorities for travel. Even those in low-risk areas are encouraged not to travel during the holiday.

Beijing also urged private enterprises to give employees "red envelopes"-- containing money traditionally offered during Chinese New Year and said to bring luck to the recipient -- as incentives to encourage them to remain at their places of work.

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